First Internet Bancorp · NASDAQ:INBK
First Internet Bancorp — Q2 2020 Earnings Presentation
35 slides from First Internet Bancorp's earnings presentation, Sep 8, 2020
Slide 1: Investor Presentation Second Quarter 2020
Investor Presentation Second Quarter 2020 Exhibit 99.1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may contain forward-looking statements with respect to the financial condition, results of operations, trends in lending policies, plans, objectives, future performance or business of the Company. Forward- looking statements are generally identifiable by
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures, specifically adjusted net income, adjusted diluted earnings per share, average tangibl
Slide 4: A Pioneer in Branchless Banking
A Pioneer in Branchless Banking • Digital bank with unique business model and over 20 years of operations • Highly scalable technology driven business • Nationwide deposit gathering and asset generation platforms • Attractive lending niches with growth opportunities • History of strong growth and a
Slide 5: Nationwide Branchless Deposit Franchise
Nationwide Branchless Deposit Franchise $538.3 million $3.4 Billion 15.9% Total Deposits* $674.8 million 20% $1,326.7 million 39.2% 28.7% 5-year CAGR* Nationwide consumer, $560.8 million $280.2 million small business and 8.3% 16.6% commercial deposit base Innovative technology and convenience suppor
Slide 6: Multiple Opportunities to Grow Deposits
Multiple Opportunities to Grow Deposits . Capitalize on the enduring trend toward branchless banking – consumers and small business are increasingly moving their banking business online, especially following the experience of COVID-19 . Generate an increased level of lower-cost deposits as expansion
Slide 7: National and Regional Asset Generation Platform
National and Regional Asset Generation Platform DIVERSIFIED ASSET GENERATION PLATFORM Commercial - National Commercial - Regional . C&I – Central Indiana . Single tenant lease financing . C&I – Arizona . Small business lending . Investor CRE – Central Indiana . Public finance . Construction – Centra
Slide 8: Small Business, Big Opportunity
Small Business, Big Opportunity . Complementary to existing business lines . Diversifies revenue in a capital efficient manner . Opportunities on both sides of the balance sheet Enhanced Treasury Upgraded Digital SBA Lending Management Capabilities Account Access 8
Slide 9: Entrepreneurial Culture Key to Success
Entrepreneurial Culture Key to Success First Internet Bank has been recognized for its innovation and is consistently ranked among the best banks to work for, enhancing its ability to attract and retain top talent . American Banker’s “Best Banks to Work For” Six years in a row . “Top Workplaces in
Slide 10: Credit Update
Credit Update . Loan deferral balances have moved significantly lower since peaking in late- May at $647.2 million . Loans on deferral are down to $45.2 million as of August 28, 2020, or 1.6% of the total loan portfolio . Significant reduction of single tenant loans on deferral during August . All b
Slide 11: Loan Deferral Summary
Loan Deferral Summary Deferrals As of As of As of As of As of April 17, May 15, June 19, July 17, August 28, % of Balances (Dollars in millions) 2020 2020 2020 2020 2020 with Deferrals1 Commercial and industrial $15.4 $15.9 $15.9 $1.7 $0.5 0.7% Single tenant lease financing $11.8 $259.0 $273.7 $276.
Slide 12: Near-term Profitability Drivers
Near-term Profitability Drivers . Continued deposit repricing opportunity combined with stabilized asset yields provides significant opportunity to increase net interest income and net interest margin . Accelerated build-out of SBA platform – sales and operations hiring has increased due to competit
Slide 13: Second Quarter 2020 Highlights
Second Quarter 2020 Highlights . Diluted EPS of $0.40 Earnings . Net income of $3.9 million . Total revenue of $19.4 million . Cost of interest-bearing deposits declined 30 bps from 1Q20 to 1.94% Key Operating . Allowance for loan losses / total loans, excluding PPP, increased to 0.84%1 Trends . Acc
Slide 14: History of Strong Organic Growth
History of Strong Organic Growth Execution of the business strategy has driven consistent and sustained balance sheet growth Total Assets Total Loans Dollars in millions Dollars in millions $4,325 1 $4,100 1 CAGR: 27.8% vs. Peers at 14.4% CAGR: 25.5% vs. Peers at 15.9% $2,964 $2,974 $3,542 $2,716 $2
Slide 15: Profitability Driven by Capital Deployment
Profitability Driven by Capital Deployment Capital has been deployed into new loan verticals, driving earnings growth Net Income1,2,3 Diluted EPS1,2,3 Dollars in thousands $25,239 $23,814 $23,373 $2.50 $2.51 $2.30 $2.39 $2.37 $1.96 $17,072 $21,900 $2.30 $2.13 $12,074 $15,226 $8,929 2015 2016 2017 20
Slide 16: Growth Drives Economies of Scale
Growth Drives Economies of Scale Scalable, technology-driven model has delivered increasing efficiency and is a key component driving improved operating leverage Noninterest Income Noninterest Expense1,2 $6.2 Dollars in millions Dollars in millions $13.5 $5.6 $5.4 $12.7 $12.6 $13.2 $5.0 $11.1 $11.7
Slide 17: Net Interest Income and Net Interest Margin
Net Interest Income and Net Interest Margin . Interest income earned on loans, securities and Net Interest Income – GAAP and FTE1 cash balances declined primarily due to the Dollars in millions impact of lower interest rates following the GAAP FTE $17.7 $16.8 $16.9 Federal Reserve rate cuts in March
Slide 18: Net Interest Margin Drivers
Net Interest Margin Drivers . Linked quarter NIM decline primarily attributable to the impact of significantly lower short-term interest rates on loan and securities yields as well as cash balances, which remained elevated during the quarter . Interest-earning asset yields expected to stabilize . Si
Slide 19: Deposit Composition
Deposit Composition . Total deposits increased $202.3 million, or 6.4%, compared to 1Q20, and $374.5 million, or 12.5%, year- over-year . Quarterly money market growth of $311.2 million, including $219.3 million in small business . CD and brokered deposit balances decreased $161.2 million compared t
Slide 20: Liquidity and Capital
Liquidity and Capital . Regulatory capital ratios remained strong at the Company and Bank levels . Expect to have sufficient liquidity, supplemented by access to multiple funding sources, to handle the current economic impact of COVID-19 . Increase in cash balances and PPP loans impacted the Company
Slide 21: Loan Portfolio Overview
Loan Portfolio Overview . Total loans increased $81.6 million, or 2.8%, compared to 1Q20, and increased $112.5 million, or 3.9%, year-over-year . Commercial loan balances increased $98.9 million, or 4.3%, compared to 1Q20 as growth in small business (PPP loans), public finance, and construction lend
Slide 22: Single Tenant Lease Financing
Single Tenant Lease Financing Portfolio mix by major tenant . $980.3 million in balances as of June 30, 2020 Red Lobster . Long term financing of single tenant properties occupied 7% ICWG by historically strong national and regional tenants 7% Wendy's . Weighted-average portfolio LTV of 54% (55% for
Slide 23: Public Finance
Public Finance Borrower mix by credit rating . $647.1 million in balances as of June 30, 2020 1% . Provides a range of credit solutions for government and 3% 5% AAA/Aaa 5% not-for-profit entities AA+/Aa1 . Borrowers’ needs include short-term financing, debt AA/Aa2 AA-/Aa3 refinancing, infrastructure
Slide 24: Healthcare Finance
Healthcare Finance . $381.0 million in balances as of June 30, 2020 Portfolio mix by borrower 1% . Loan portfolio focused primarily on dental practices with some exposure to veterinary practices and other specialties 6% . Borrowers’ needs include practice finance or acquisition, acquiring or Dentist
Slide 25: C&I and Owner-Occupied Commercial Real Estate
C&I and Owner-Occupied Commercial Real Estate . $168.6 million in combined balances as of June 30, 2020 Portfolio Mix by State . Current C&I LOC utilization of 34% 2% 5% IN . Average loan sizes 5% . C&I: $346,000 5% AZ . Owner-occupied CRE: $1.0 million IL 56% . Exited relationships totaling in exce
Slide 26: Small Business Lending
Small Business Lending . $118.5 million in balances as of June 30, 2020 Portfolio Mix by State . Approved and funded 449 loans totaling $58.9 million to date IN under the Paycheck Protection Program 21% . SBA will be making scheduled loan payments for 7(a) IL program borrowers for a six month period
Slide 27: Residential Mortgage
Residential Mortgage . $231.3 million in balances as of June 30, 2020 National Portfolio with (includes home equity balances) Midwest Concentration . Direct-to-consumer originations centrally located at corporate headquarters . Focused on high quality borrowers 24% 10% 55% . Avg. loan size of $183,5
Slide 28: Specialty Consumer
Specialty Consumer . $291.6 million in balances as of June 30, 2020 Geographically Diverse Portfolio . Direct-to-consumer and nationwide dealer network originations . Focused on high quality borrowers 22% 10% . Avg. credit score at orig. of 779 18% . Avg. loan size of $19,300 . Strong historical cre
Slide 29: Excellent Asset Quality
Excellent Asset Quality Asset quality remains among the best in the industry driven by a strong credit culture and lower-risk asset classes NPAs / Total Assets NPLs / Total Loans 0.37% 0.31% 0.28% 0.21% 0.22% 0.24% 0.23% 0.10% 0.09% 0.02% 0.04% 0.03% 2014 2015 2016 2017 2019 2Q20 2014 2015 2016 2017
Slide 30: Long-term Strategy
Long-term Strategy . Manage balance sheet growth and deploy excess liquidity to fund loan growth and/or higher-cost deposit runoff . Continued loan production combined with loan sales to enhance noninterest income and improve the mix of earning assets . Build capital through improved profitability a
Slide 31: Appendix
Appendix 31 NOOR P
Slide 32: Loan Portfolio Composition
Loan Portfolio Composition Dollars in thousands 2017 2018 2019 1Q20 2Q20 Commercial loans Commerical and industrial $ 122,940 $ 107,405 $ 96,420 $ 95,227 $ 81,687 Owner-occupied commercial real estate 75,768 77,569 86,726 87,956 86,897 Investor commerical real estate 7,273 5,391 12,567 13,421 13,286
Slide 33: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures 2015 2016 2017 2018 2019 TTM 2Q20 Net income - GAAP $8,929 $12,074 $15,226 $21,900 $25,239 $23,373 Adjustm e nts: Write-down of other real estate owned - - - 1,914 - - Net deferred tax asset revaluation - - 1,846 - - - Adjusted net income $8,929 $12,074
Slide 34: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 2Q20 Total equity - GAAP $287,740 $288,735 $294,013 $296,120 $295,140 $304,913 $305,127 $307,711 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) Tangible common
Slide 35: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2013 2014 2015 2016 2017 2018 2019 2Q20 Total equity - GAAP $90,908 $96,785 $104,330 $153,942 $224,127 $288,735 $304,913 $305,127 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) Tangible common e
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